30 Years Fixed Loan Program
30 year fixed interest rate is one of the most desirable loan programs in the nation, most people seek the low monthly payments and prefer 30 years fixed rate as compared to a variable rate. The interest rates are volatile and always move up and down briskly, and therefore the majority of people like to stay with a constant fixed interest rate. The term of a 30-year loan program is long and consequently you pay more interest over the life of the loan. The 30 year fixed loan financing is recommended for borrowers who intend to stay in their house for a long period of time. It is indeed the most common and easiest fixed-rate loan to qualify for. Its longer term gives you the best chance to keep monthly payments low and use the extra cash for other purposes.
15 Years Fixed Loan Program
A 15-year fixed-rate mortgage offers a lower interest rate than a 30-year or a 20-year mortgage and will save you a significant amount of interest over the life of a loan. You will build up equity in your home quickly, which can allow you to move to a more expensive home sooner. If you are nearing retirement, this shorter-term allows you to own your home sooner. A 15 years fixed interest rate is suitable for people seeking to pay the loan quickly and thus prefer 15 years fixed rate as compare to a variable rate or 30 years fixed. The term of 15 year fixed loan program is short as compared to 30 years fixed. Thus, monthly payments are higher but the loan amount pays off quickly and you pay less total interest amount over the life of the loan.
Adjustable Interest Rate (ARM) Loan Program
7 year ARM, 5 year ARM, 3 year ARM, 1 year ARM, 7/1, 5/1, 3/1, 1/1
An adjustable rate mortgage (ARM) is a loan with an interest rate that can be adjusted at pre-set intervals. The amount of the adjustment depends on several factors outlined below. Some ARM loans have an initial period when the interest rate is fixed for a period of time 2,3,5,7,or 10 year. After the fixed period the loan converts to an adjustable rate mortgage. Some ARM loans are adjustable during the first year with adjustable beginning after 1,3,6, or 12 months. Usually, there is a cap on the rate, which determines the highest the rate could ever go after the ARM period is over. Adjustable Interest Mortgage (ARM) loans adjust based on the following factors:
The index of an ARM is the financial medium that the loan is “attached” to, or adjusted to. The most familiar indices, or, indexes are the LIBOR (London Interbank Offered Rate), 1-Year Treasury Security, 6-Month Certificate of Deposit (CD), Prime, and COFI (the 11th District Cost of Funds). Each of these indices moves up or down based on fluctuations in the financial markets.
The margin is one of the most significant aspects of ARMs because it is added to the index to determine the interest rate that you pay. The margin added to the index is known as the fully indexed rate. As an example if the current index value is 4.250% and your loan has a margin of 2.0%, your fully indexed rate is 6.250%. Margins on loans range from 1.75% to 3.5% depending on the index and the amount of the loan.
- Payment Caps:
Several loans programs have payment caps as a substitute of interest rate caps. These loans programs diminish payment shock in a rising interest rate market, but can also lead to deferred interest or “negative amortization”. Such loans normally cap your annual payment increases to 7.5% of the previous payment.
- Interim Caps:
This limits how the interest rate can be changed each time it is adjusted. The cap is usually between 1 and 2%.
- Lifetime Caps:
Practically all ARMs have a maximum interest rate or lifetime interest rate cap. However, the limit of lifetime cap varies within each company and different loan programs. Loans with low lifetime caps usually have higher margins.
Advantages to FHA Loans
- FHA loans can be used for a home purchase or a refinance.
- Easiest type of real estate mortgage loan to qualify for because it requires a low down payment you can have less-than-perfect credit.
- FHA insures your mortgage making lenders more willing to offer loans.
- FHA loan is assumable, meaning if you want to sell your home, the buyer can “assume” the loan you have.
FHA Qualification Checklist
- Steady employment history or worked for same employer for the last two years.
- Valid Social Security number, lawful residency in the U.S., and be of legal age to sign a mortgage in your state.
- Make a minimum down payment of 3.5% on the house. The money can be gifted by a family member (conventional financing does not allow gifting).
- A property appraisal from an FHA-approved appraiser.
- Mortgage payment (including principal, interest, property taxes, property insurance) needs to be less than 31% of your gross monthly income.
- Monthly debt (mortgage, credit cards, auto, student loans, etc.) cannot be more than 43% of your monthly income.
- A minimum credit score of 620.
- Two years out of Chapter 7 bankruptcy with good established credit.
Three years out of Chapter 7 foreclosure, with good established credit.
One year completed of Chapter 7 payment history
Any Questions Regarding A Mortgage, Contact Our In House Mortgage Dept.
Thomas P. Barnes | Branch Manager
3225 Victory Blvd |Suite #3| Staten Island, NY, 10314
NMLS # 1549529 | Company # 125182
C: (718) 207-1539
O: (718) 441-LEND (5363)
NJ- Licensed by the NJ Department of Banking and Insurance – License # 9964632
NY- Licensed by New York State Dept. of Financial Services License # B500689